WEDNESDAY, May 6, 2009 — With so many sensational news stories calling this the worst economy ever and a mammoth economic "stimulus" bill passing Congress with few people — if any — actually reading the thing, there's more confusion circulating than facts.

Admitting we're in a global recession, Ron Wainwright cautioned the Committee of 100 not to buy into the hype run amok. As a tax member for the Dixon Hughes accounting firm, Wainwright believes things aren't quite as bad as they're portrayed.

"Some say its the worst market since the depression," he told about 100 people during a thorough and extensive presentation on Apr. 21. "The reality is this is a misperception in the market. Yes, there is a recession .... But, we're not anywhere close to the Great Depression."

Interest rates are the lowest in five decades, Wainwright pointed out. And while unemployment had crept up to 8.5 percent at the time of his presentation, the figure actually topped 20 percent in the 1930s.

What the $787 billion "Stimulus Plan" was designed to do, he said, was to keep unemployment from getting any higher — to increase jobs and stimulate the economy. The highly-partisan, pork-laden bill should work, he concluded, but spending wasn't always targeted in the right places.

And, Wainwright says, it's not enough. More installments are already working their way through Congress.

Redistributing Wealth

The American Recovery and Reinvestment Act of 2009, the formal name for this year's federal "stimulus" legislation, also marks a significant change in government policy. Wainwright said American tax policy is now being reshaped to redistribute wealth in the United States — something, he says, isn't surprising given the goals President Barack Obama outlined during last year's presidential campaign.

With that in mind, Wainwright launched into a lengthy analysis of what the legislation means for individuals and businesses, beginning with provisions for $300 billion in short-term tax relief; spending on infrastructure projects, including roads; money for state and local governments to spend on many programs, including education and Medicaid; and increased spending for unemployment and other direct benefits paid by the federal government.

At roughly 1,600 pages, the bill contains far too many provisions to list. But here are a few highlights from Wainwright's overview for individual taxpayers:

* A "Making Work Pay" tax credit provides an individual tax credit of
about $400 for individuals or $800 for couples with a Modified
Adjusted Gross Income of less than $75,000 for individuals or
$150,000 for couples.

* First-time homebuyers may be eligible for a tax credit equal to
10 percent of the purchase price, up to a total of $8,000. The
credit amounts to an interest-free loan repaid over 15 years.

* Fewer families will be subject to the Alternative Minimum Tax,
often described as a parallel tax system, designed to raise the
amount of federal tax paid by higher-income taxpayers using
preferences written into the tax code.

* Tax credits or deductions were expanded and created for higher
education expenses, people on fixed incomes, child care expenses,
unemployment benefits and working families with three or more
children receiving the Earned Income Tax Credit.

Pushing Agenda and Punishing
International Business

Business and corporate tax policy also was reshaped according to new presidential priorities, with changes designed to push the Obama agenda — for example, reducing tax benefits for the oil and gas industry to promote alternative fuels — limit Wall Street, and punish companies with international operations.

The new agenda was expected. Targeting multinational operations, though, drew heated debate. The administration's goal, Wainwright explained, is to bring "outsourced" jobs back to the Unites States, and the only way to do that through tax policy is to penalize businesses with international operations.

Among the highlights for business taxpayers:

* The 50 percent bonus depreciation allowed in last year's "stimulus"
act was extended, allowing businesses to claim an immediate
50 percent deduction for new property qualifying under the rule.

* Net operating losses for any tax year beginning or ending in 2008
can be carried back for five years (increased from two years) to
offset past taxable income. The provision is available only to
small businesses with gross receipts of $15 million or less, and
the two-year rule returns beginning this tax year.

* Work Opportunity Tax Credits, equal to 40 percent of the first
$6,000 of wages paid to employees in select groups, have
been expanded to include unemployed veterans and
"disconnected youth" who are hired and begin work in
2009 or 2010.

* A rule allowing investors to exclude 50 percent of the capital
gain from the sale of certain small business stock held for more
than five years has been expanded. Investors may now exclude
75 percent in some cases.

In addition to mentioning other "stimulus" provisions and providing more detail on these, Wainwright went into significant detail on other federal tax proposals expected to become law in the near future, proposed state tax increases and the debate surrounding claims being made by supporters and opponents of the federal "stimulus"

Slides from "'Stimulus' and You," the full presentation (1.3M PDF), are available at http://lcedc.com/c100/documents/C100StimulusAndYou.pdf.